Bengaluru-based cleantech startup ThingsCloud Technologies sells about 1,500 inverters a month. Over the next 12 months, it expects to sell about 60,000. Even at those numbers, it would be a blip in the overall inverter market in a country that suffers from extreme power shortages.
But, Amruth Puttappa, co-founder and CEO of ThingsCloud, is looking at the big picture. He believes that his smart solar inverters will eventually be the future.
“There have always been issues with power generation, storage and transmission, resulting in unstable grids and power generation on a daily basis. ThingsCloud was born out of a need to produce smart power products that are clean, intelligent and controlled,” Puttappa told TechCircle in an interview.
Puttappa, who did his electrical engineering at the University of Austin, Texas, and his co-founder Anusheel Nahar (a University of Wisconsin-Madison graduate in electronics and control systems) spent several years in the power and energy sector before identifying what might sound like an obvious gap -- the market didn’t have any smart inverters. “Users wanted a seamless experience for their power optimisation, power conversion and power generation. This is how the idea of building smart solar inverters came into the picture,” he says. Nahar and he met through mutual friends.
After Puttappa and Nahar started up in 2015, they realised that only a combination of hardware and software powered by algorithms could solve the issue at scale because power issues were different in different parts of the country.
“The inverters available in the market right now and back then were dumb inverters built from a ‘one size fits all’ standpoint. Our aim was to build smart solar inverters which would learn from users based on AI (artificial intelligence) data and adapt to the user’s needs. The system would learn user behaviour such as the time of power usage, the pattern of power supply and other such factors,” Puttappa said, adding that it took the company almost three years to complete the product and hit the market.
Inside the smart inverter
ThingsCloud’s smart inverter is connected to a solar panel at one end and the power grid on the other end if the customer is interested in adding capacity to the grid. Puttapa said that end-user examples will include rooftop solar installations at the customer homes, villa projects and small office segments.
However, the duo faced a challenge when it came to imparting intelligence to the inverter as no datasets on power consumption exists till date. Instead, Puttapa and Nahar designed algorithms manually based on research and experience to help the machine identify power usage, supply patterns.
“As there was no data available, we had to design algorithms that would help the machine keep on learning. The more the inverter gets used, the smarter it will become,” he said, adding that these algorithms are mostly present on the company’s cloud stack.
“The inverter gathers data and sends it to the cloud for processing and then gets back an intelligent solution. The monitoring happens through a smartphone application,” Puttapa said, adding that the inverter itself has a Texas Instruments-made chip that is capable of understanding metrics such as power generation prediction, customer demand and loss of power due to dust.
“Once the data is processed by the cloud, we can get back insights such as demand forecast, prediction of system failures etc,” he said.
According to US-based independent and statistical analytics firm Energy Information Administration (EIA), India suffers from one of the highest levels of electricity transmission and distribution (T&D) losses globally. T&D losses account for the electricity that is generated but doesn’t reach the customers. As per EIA, India’s T&D losses equals 20% of the total generated amount, which is more than twice the global average and nearly three times as much as the US.
So the problem is in the grid and there are only a few power sources, mostly renewable in nature, that are not grid dependent. Capitalising on this gap, ThingsCloud Technologies has used emerging technologies such as artificial intelligence (AI), cloud and internet of things (IoT) to come out with a solution that not only looks at powering your house all the time but also add capacity to the grid.
The regulatory and governmental efforts in the renewable energy sector, especially in solar, has aided Puttappa’s bet. Currently, as per data from the power ministry, the country’s total renewable energy capacity stands close to 80 Gigawatt (GW) accounting for almost 22% of total power generation. Renewable sources of energy include wind, solar, biogas and SPV (solar photovoltaic) systems. Out of the entire stack, solar including ground-mounted and roof-top contributes to around 30 GW, second only to wind, as per data from the ministry of new and renewable energy.
The government has also started doling out new electricity meters to new connection requests that not only measure the power consumed but also the power generated. This new meter is called Net meter and according to Puttappa consumers using ThingsCloud inverters will be able to check how much they are adding to the grid using these new meters.
So, if a user is interested in generating solar power and passing it to the grid, then the person has to apply for a new Net meter at the state electricity board which would be able to read how much the user is passing onto the grid. The approval process takes around 20 days. “Once the Net meter is installed, the discomm can buy electricity from the user at a given tariff that may vary from state to state. The sale of electricity is offset against the consumption bill,” Puttappa said, adding that his partner companies who install the solar systems and inverters also assist in the application filing process
Business strategy, market opportunity and clients
According to Puttappa, getting the product ready was not an easy job but the company did not have to change its business model. “We had almost three to four different iterations and field trial. We tried multiple field trials sending it to different parts of the country to ensure the ease and feasibility of supply chain, logistics and product success on field,” he said.
The India market, he added, represented a $8 billion opportunity by 2020 with a unit size market of eight million that was growing at a CAGR of 20%. Currently, close to eight million UPS inverters are sold in India in comparison with just one million solar inverters being sold.
However, ThingsCloud doesn’t serve the B2C market in general and has taken the B2B route. It works with solar system integrators and channel partners to do the bulk of sales and the company’s average price come to Rs 20,000 per unit.
Basis the sales strategy, the company has a two-pronged revenue model. “We have two different business models, one where we sell the product and generate revenue. The other would be a SaaS revenue where we get monetised by data through data service and intelligence which we build on top of the inverters,” he said, adding that it took the company six months to sign up its first customer.
Currently, the company, which considers ABB Solar Inverters, Schneider Solar Inverters and Solis Solar Inverters as its main rivals, has seven large clients who Puttappa claims are buying close to a couple of 100 inverters a month.
Funding, revenue and future plans
The company was bootstrapped till mid 2017 before it raised a seed round close to Rs 20 lakh from undisclosed investors. It later raised another half a million dollars from strategic investors again after pitching to almost ten investors.
“Many people had difficulty understanding the inverter market then. We had a hardware piece in our product, so people had doubts about its execution capability,” Puttappa said, adding that it took the company almost seven months to close the first round of funding.
One of the most difficult challenges that the founders faced when they went out to raise capital was that they didn’t come from a business background. “Being hardcore techies, it was not easy for us to run a company and bring it to scale, manage cash flow, understand how the business works, and getting into product marketing which was all new for us. Another truth bomb must be that it takes more time to build the product than one expects to,” he said.
However, despite the challenge of running a company, Puttapa remains confident about the company’s revenue prospects and believes that the secret sauce lies in scaling its manufacturing capacity. “We are right now doing 1,000 to 1,500 inverters a month. We need to reach a scale of 3,000 to 5,000 quickly in order for us to make more revenue,” Puttapa said, adding that the company currently contracts manufactures its product via a Bengaluru-based company. It claims to have over 35,000 units in purchase orders and according to Puttappa reported a revenue of Rs 3 crore last year.
“This year we are looking at making Rs 10-15 crores worth of revenue and expanding to a total team size of 60 people from the current 35,” he said.